Friday, January 23, 2009

"We need no shelter from the elements. We don't need a TARP to cover anything up. We are strong and continue to do just fine on our own."

Those are my words. But around the country, they may just be an accurate paraphrase of many a conservative bank CEO.

First let's look at three snippets from Wikipedia. They may explain why the majority of strong bank leadership these days has said "No Thanks" to TARP assistance.

1) The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase assets and equity from financial institutions in order to strengthen the financial sector. It is the largest component of the government's measures in 2008 to address the subprime mortgage crisis.

2) Tarps have multiple uses, including as shelter from the elements.

3) The word tarpaulin originated as a compound of the words tar and palling, referring to a tarred canvas pall used to cover objects.

Ok, so let's look at some examples (I own none of these bank stocks):

From the Mountain Time Zone, you may remember, Glacier Bank (GBCI)... On Dec 30, 2008, Glacier issued this statement: "We greatly appreciate the federal government's recognition of our financial strength in approving Glacier's participation in the TARP Capital Purchase Program. However, with the $94 million in net proceeds from our successful common stock offering, we are already one of the most strongly capitalized banking companies in the country, with total risk-based capital of approximately 16%. Consequently, we do not believe that participation in TARP is in our shareholders' best interests."

On the West Coast, the Bank of Napa (BNNP) announced right before Christmas that, "it will not participate in the Department of Treasury’s Capital Purchase Program (TCPP), and will not accept TARP funds. CEO Tom LeMasters stated, “Having considered our strong balance sheet, well capitalized position, and solid credit quality we determined that TCPP provided no material benefit to the shareholders and customers of Bank of Napa.”

With assets of $32.1 billion, New York Community Bancorp, Inc. (NYB) is the 29th largest US bank and a leading producer of multi-family loans in New York City and the northeast. Last week it announced, "that it has declined to participate in the Capital Purchase Program of the U.S. Treasury’s Troubled Asset Relief Program (“TARP”)." Chairman, President, and Chief Executive Officer Joseph R. Ficalora continued, “We believe that our current capital position is sufficient to support the communities we serve and to enhance shareholder value by growing our assets, our franchise, and our earnings capacity."

From the Mid-Atlantic region, Bryn Mawr Bank Corp,(BMTC) also has declined TARP help: Bryn Mawr CEO Ted Peters said the bank has enough capital and access to a variety of liquidity sources to support its loan growth initiatives. Peters said the bank decided it wasn’t necessary to participate in the program. “As a community bank we did not make sub-prime loans and as a result of our conservative lending practices our balance sheet is strong,” Peters said in a statement. “We are very optimistic about our ability to serve the future borrowing needs of the communities we serve.”

And today from Fort Lauderdale, OptimumBank Holdings (OPHC) Chairman of the Board, Albert J. Finch said, "After careful consideration of all factors associated with receipt of TARP funds and the fact that the Company has capital well in excess of that required to be considered well-capitalized under banking regulations, we have decided to decline the TARP money."

So from across the country you see banks with strong balance sheets, access to liquidity, well capitalized asset portfolios, and solid credit quality. Why is that not highlighted in the national press headlines?

I love the old school regional and community banks with their conservative leadership. The fact is that these banks didn't get involved in most of the questionable practices that the big boys immersed themselves in. Great post and a terrific blog.

I heard one of these CEOs say a few months ago, "if I don't understand what I'm buying, I don't buy it. And if I don't know who you are, I don't lend to you. That's worked well for us in the past and is still working for us today."